Deducting Losses From Federally Declared Disasters on Your Federal Income Tax Return
/According to the IRS:
Personal casualty losses are losses from casualty, disaster, and theft that are not connected to a trade or business, or a transaction entered into for profit. Generally, if the loss is caused by a federally declared disaster, you may deduct personal casualty losses relating to your home, household items, and vehicles on your federal income tax return. For tax years 2018 through 2025, personal casualty losses are otherwise not deductible. A theft loss deduction is generally available, however, if the loss is due to theft related to a transaction entered into for profit. You may not deduct casualty and theft losses covered by insurance, unless you file a timely claim for reimbursement, and you reduce the loss by the amount of any reimbursement or expected reimbursement.
A federally-declared disaster is any disaster determined by the President of the United States to warrant assistance by the federal government. Visit fema.gov/disasters for a list of federally-declared disasters. Current and recent federally-declared disasters as of January 2025 include:
California Hurst File (FM-5551-CA) declared 1/8/25 www.fema.gov/disaster/5551
California Wildfires and Straight-Line Winds (DR-4856-CA) declared 1/8/25 www.fema.gov/disaster/4856
California Eaton Fire (FM-5550-CA) declared 1/8/25 www.fema.gov/disaster/5550
California Palisades Fire (FM-5549-CA) declared 1/7/25 www.fema.gov/disaster/5549
California Franklin Fire in Malibu (FM-5548-CA) declared 12/10/24 www.fema.gov/disaster/5548
California Mountain Fire in Ventura County (FM-5545-CA) declared 11/6/24 www.fema.gov/disaster/5545
California Airport Fire in Orange/Riverside Counties (FM-5538-CA) declared 9/11/24 www.fema.gov/disaster/5538
California Bridge Fire in LA/San Bernardino Counties (FM-5537-CA) declared 9/11/24 www.fema.gov/disaster/5537
If your property is personal-use property or isn't completely destroyed, the amount of your casualty loss is the lesser of the adjusted basis of your property, or the decrease in fair market value of your property as a result of the casualty. You must reduce the loss by any insurance or other reimbursement you receive or expect to receive.
Casualty losses can be claimed as an itemized deduction on Schedule A of Form 1040, less $100 for each casualty, then subtract 10% of your adjusted gross income to calculate allowable losses for the year. However, you may elect to deduct the loss without itemizing your deductions. Your net casualty loss doesn't need to exceed 10% of your adjusted gross income to qualify for the deduction, but you would reduce each casualty loss by $500 after any salvage value and any other reimbursement. Report casualty losses on Form 4684, Casualties and Thefts.
Casualty losses are deductible in the year you sustain the loss. You have not sustained a loss if you have a reasonable prospect of recovery through a claim for reimbursement. If you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to treat the casualty loss as having occurred in the year immediately preceding the tax year in which you sustained the disaster loss, and you can deduct the loss on your return or amended return for that preceding tax year.
